STOP NOTICE AND NOTICE TO WITHHOLD FUNDS
(IA Mechanics’ Lien – Iowa Code ch. 572)
[// GUIDANCE: This template is intended for use by a subcontractor, material supplier, or equipment lessor (“Claimant”) who seeks to compel the project Owner, Construction Lender, and/or General Contractor (“Obligor(s)”) to withhold further payments otherwise due to the Direct Contractor until the Claimant’s lien claim is resolved. Iowa does not expressly label this remedy a “stop-notice,” but Iowa Code § 572.13A–.16 authorizes a preliminary notice, lien claim, and bonding-off procedure that effectively freezes project funds. Adapt the template to the project tier, delivery method, and parties involved.]
TABLE OF CONTENTS
- Document Header
- Recitals
- Definitions
- Operative Provisions
- Representations & Warranties
- Covenants
- Default & Remedies
- Risk Allocation
- Dispute Resolution
- General Provisions
- Execution Block
- Exhibits & Schedules
1. DOCUMENT HEADER
Title: Stop Notice and Notice to Withhold Funds
Effective Date: [EFFECTIVE DATE]
Project: “[PROJECT NAME / DESCRIPTION]” located at [PROJECT ADDRESS], County of [COUNTY], State of Iowa.
Claimant: [LEGAL NAME], an [ENTITY TYPE] organized under the laws of [STATE], with its principal office at [ADDRESS].
Obligor(s):
a. Owner: [OWNER LEGAL NAME], [ADDRESS]
b. Direct (General) Contractor: [GC LEGAL NAME], [ADDRESS]
c. Construction Lender (if any): [LENDER LEGAL NAME], [ADDRESS]
2. RECITALS
A. Claimant has furnished labor, material, and/or equipment to the Project pursuant to a subcontract or purchase order dated [SUBCONTRACT DATE] with [CONTRACTING PARTY].
B. As of the date hereof, Claimant is owed the principal amount of $[AMOUNT] for unpaid labor, materials, equipment, retainage, and/or change-order work (collectively, the “Claimed Sum”).
C. Iowa Code chapter 572 (the “Iowa Mechanics’ Lien Law”) grants Claimant a statutory lien and the right to serve notice requiring the withholding of project funds pending resolution of the lien claim.
D. Claimant desires to protect its lien rights and mitigate non-payment risk by directing Obligor(s) to withhold disbursement of project funds otherwise payable to the Direct Contractor, all as more fully set forth below.
NOW, THEREFORE, Claimant issues this Stop Notice and Notice to Withhold Funds (this “Notice”) and states as follows:
3. DEFINITIONS
For purposes of this Notice, the following terms have the meanings indicated:
“Bond to Release Lien” – A surety bond satisfying the requirements of Iowa Code § 572.15, furnished to release the Project from Claimant’s lien, in a penal sum of at least one hundred twenty-five percent (125 %) of the Claimed Sum.
“Claimed Sum” – The unpaid principal amount of $[AMOUNT], together with any interest, finance charges, costs, and attorney fees recoverable under Iowa Code § 572.32.
“Lien Claim” – Claimant’s mechanic’s lien filed with the Iowa Secretary of State on [FILING DATE] under document number [FILING NUMBER].
“Obligor(s)” – Collectively, the Owner, the Direct Contractor, and the Construction Lender identified in Section 1.
“Project Funds” – All retainage, progress payments, and other contract balances presently or hereafter payable by any Obligor to the Direct Contractor in connection with the Work.
“Release Event” – Occurrence of any of: (i) full payment of the Claimed Sum to Claimant; (ii) posting of an acceptable Bond to Release Lien; or (iii) written release of the Lien Claim by Claimant.
“Work” – The labor, materials, and/or equipment furnished by Claimant to the Project, as more particularly described in Exhibit A.
4. OPERATIVE PROVISIONS
4.1 Stop-Payment Directive. Pursuant to Iowa Code §§ 572.13A–.16, Claimant hereby directs each Obligor to immediately withhold from the Direct Contractor Project Funds in an amount not less than the Claimed Sum, plus reasonable reserves for potential interest, attorney fees, and costs (collectively, the “Withheld Funds”).
4.2 Duration. The withholding shall remain in effect until the earliest Release Event, at which time Claimant shall deliver a written acknowledgement of release of this Notice within three (3) Business Days.
4.3 Scope. The withholding obligation attaches to all Project Funds not yet disbursed as of the date of actual receipt of this Notice by the respective Obligor, including but not limited to retainage.
4.4 Non-Compliance. Any Obligor disbursing Project Funds in violation of this Notice, with actual knowledge hereof, may become personally liable to Claimant to the extent of such improper disbursement, without prejudice to any other statutory remedies.
4.5 Conditions Precedent Satisfied. Claimant confirms that it has timely filed (or will contemporaneously file) the required Preliminary Notice and Lien Claim pursuant to Iowa Code §§ 572.13A & 572.8, thereby perfecting its right to serve this Notice.
5. REPRESENTATIONS & WARRANTIES
Claimant represents and warrants to each Obligor as of the Effective Date that:
5.1 Authority. Claimant is duly organized, validly existing, and in good standing, and the undersigned is authorized to execute and deliver this Notice.
5.2 Accuracy. The Claimed Sum is true, correct, and due, and all payments, credits, and offsets known to Claimant have been applied.
5.3 Compliance. Claimant has complied in all material respects with Iowa Code ch. 572, including timely filing of the Preliminary Notice (if applicable), Lien Claim, and verification of amounts owed.
5.4 No Waiver. Claimant has not waived, subordinated, or assigned its lien rights or right to payment except as expressly disclosed in Schedule 1 attached hereto.
The foregoing representations survive delivery of this Notice.
6. COVENANTS
6.1 Cooperation. Claimant shall reasonably cooperate with any Obligor that elects to post a Bond to Release Lien, including prompt issuance of a lien release upon receipt of acceptable bonding documentation.
6.2 Updates. Claimant shall supplement the Claimed Sum within five (5) Business Days of any material change and shall provide updated accounting upon written request.
6.3 Release Upon Payment. Upon receipt of full payment of the Claimed Sum in immediately available funds, Claimant shall file a Satisfaction of Lien pursuant to Iowa Code § 572.23 and deliver a written release of this Notice to each Obligor.
7. DEFAULT & REMEDIES
7.1 Events of Default. It shall be an Event of Default if any Obligor:
a. Disburses Project Funds in violation of Section 4.1; or
b. Fails to retain the Withheld Funds until occurrence of a Release Event.
7.2 Cure Period. Claimant shall provide written notice of default, and the Obligor shall have three (3) Business Days to cure by restoring the improperly disbursed amount or by furnishing a Bond to Release Lien.
7.3 Remedies. Upon an uncured Event of Default, Claimant may:
a. Enforce personal liability against the defaulting Obligor to the full extent permitted by Iowa Code ch. 572;
b. Seek prejudgment attachment or injunctive relief to freeze Project Funds;
c. Recover costs, expenses, and reasonable attorney fees under Iowa Code § 572.32.
8. RISK ALLOCATION
8.1 Indemnification. Each Obligor releasing the Withheld Funds before a Release Event shall indemnify and defend Claimant from any loss arising out of such premature release, including consequential damages reasonably foreseeable at the time of breach.
8.2 Limitation of Liability. Claimant’s total recoverable damages against any single Obligor under this Notice shall not exceed the amount of Project Funds improperly disbursed by that Obligor, together with statutory interest, costs, and attorney fees expressly allowed by Iowa Code § 572.32.
8.3 Bonding-Off Rights. Any Obligor may at any time discharge this Notice by obtaining and recording a Bond to Release Lien. Upon receipt of satisfactory evidence of such bond, Claimant shall file a release of this Notice and substitute the bond for the Withheld Funds as the sole security for the Lien Claim.
8.4 Force Majeure. Performance dates under this Notice shall be equitably tolled for Force Majeure Events beyond the reasonable control of the affected party, excluding payment obligations.
9. DISPUTE RESOLUTION
9.1 Governing Law. This Notice shall be governed by, and construed in accordance with, the laws of the State of Iowa, including Iowa Code ch. 572.
9.2 Forum Selection. Any action arising out of, relating to, or enforcing this Notice or the Lien Claim shall be filed exclusively in the state courts of competent jurisdiction located in [COUNTY] County, Iowa.
9.3 Injunctive Relief. Claimant’s right to injunctive or equitable relief to enforce the withholding of Project Funds is preserved and is cumulative of any statutory remedies.
9.4 Arbitration & Jury Trial. Arbitration is not applicable, and nothing herein constitutes a waiver of jury trial rights where otherwise available.
10. GENERAL PROVISIONS
10.1 Amendments & Waivers. Any amendment or waiver must be in a writing signed by Claimant. No course of conduct shall operate as a waiver.
10.2 Assignment. Claimant may not assign this Notice without prior written consent of the Owner; provided, Claimant may collaterally assign its rights to a financing party.
10.3 Successors & Assigns. This Notice is binding upon and inures to the benefit of the parties and their respective successors and permitted assigns.
10.4 Severability. If any provision is held invalid or unenforceable, the remainder shall remain in full force, and the invalid provision shall be reformed to the minimum extent necessary.
10.5 Entire Notice. This Notice, together with the Exhibits and Schedules, constitutes the entire notice and understanding between the parties with respect to the subject matter hereof.
10.6 Counterparts; Electronic Signatures. This Notice may be executed in counterparts, each of which is deemed an original, and signatures delivered by PDF or electronic signature platform shall be deemed effective.
11. EXECUTION BLOCK
IN WITNESS WHEREOF, Claimant has executed and delivered this Stop Notice and Notice to Withhold Funds as of the Effective Date.
CLAIMANT:
[LEGAL NAME OF CLAIMANT]
By: ____
Name: [SIGNATORY NAME]
Title: [TITLE]
Date: ____
STATE OF __ )
: SS
COUNTY OF __ )
On this ___ day of ____, 20__, before me, the undersigned, a Notary Public in and for said state, personally appeared [SIGNATORY NAME], to me known, who being by me duly sworn, did say that (s)he is the [TITLE] of [CLAIMANT], an [ENTITY TYPE], and that the instrument was signed on behalf of said entity, and further acknowledged the execution of the same to be the voluntary act and deed of said entity.
Notary Public for the State of _
My Commission Expires: _______
[// GUIDANCE: Notarization is not expressly required for a stop notice under Iowa law, but including an acknowledgment enhances evidentiary weight and recordability. Delete if unnecessary.]
12. EXHIBITS & SCHEDULES
Exhibit A – Description of Work & Itemized Statement of Claimed Sum
Schedule 1 – Statement of Known Waivers, Offsets, or Subordination (if any)
[// GUIDANCE:
1. Serve this Notice by a method that provides verifiable delivery (e.g., certified mail, return receipt requested; statutory overnight delivery; or personal service).
2. File the Lien Claim with the Iowa Secretary of State within 90 days after last furnishing labor or materials, and within two (2) years commence an action to enforce, per Iowa Code § 572.27.
3. Coordinate with counsel regarding priority disputes, lender intercept agreements, and bankruptcy implications.
4. Customize bonding requirements if the parties routinely use 150 % bonds instead of 125 %.]